The verification and exchange of customer due diligence (CDD) data in terms of the Financial Intelligence Centre Act 38 of 2001

Abstract:

The prevalence of the money laundering crime has prompted the introduction of
customer due diligence (CDD) measures. CDD measures facilitate the
prevention of money laundering and promote the introduction of certain detective
skills. Several international institutions champion the introduction of the detective
skills in general and the performing of CDD measures in particular. These
institutions acknowledge the cumbersome (administrative and financial) effects
of introducing the detective skills and the performing of CDD measures.
However, these institutions concedes that the aforementioned burden can be
alleviated or lessened if the institutions that are responsible for performing CDD
measures, i.e. Accountable Institutions (AIs), can exchange and rely on third
parties’ (CDD) data. The exchange and reliance on third parties’ data must
however consider the divergent threats or risks that might be associated with the
data or third parties.
The view regarding the exchanging and relying on third parties’ data is shared
by, amongst others, the FATF and the UK. However, South Africa appears to be
lagging behind in this respect. In other words, the South African FICA and FICA
Regulations omit to encapsulate express and lucid provisions permitting the
exchanging and relying on third parties’ data for purposes of performing CDD
measures. The aforementioned omission, it is argued, creates a legal vacuum in
the South African scheme of anti-money laundering. In other words, the
aforesaid vacuum lives the South African AIs in a state of doubt regarding the
manner and extent of exchanging and relying on third parties’ data. However, the
aforesaid vacuum, this study concedes, can be rectified by introduction
provisions that are line with the draft Regulation 5A and 5B that are proposed in
chapter seven of this study.

Citation:Njotini, Mzukisi Niven (2009) The verification and exchange of customer due diligence (CDD) data in terms of the Financial Intelligence Centre Act 38 of 2001, University of South Africa, Pretoria, <http://hdl.handle.net/10500/3202>

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